Warner Bros. Discovery expects up to $4.3B in restructuring costs

Warner Bros. Discovery expects to incur around $3.2 billion to $4.3 billion in pre-tax restructuring costs related to the now completed merger of WarnerMedia and Discovery – the bulk of which will be focused on content review – per the company’s SEC filing Monday.

Approximately $2 billion to $2.5 billion will be spent on “strategic content programming assessments,” WBD said, leading to content and development write-offs. The company previously announced it will stop producing HBO Max originals in several European countries. And in August, HBO Max pulled 36 titles from its platform

WBD also expects to incur $800 million to $1.1 billion on organization restructuring, which includes employee severance, retention, relocation and other related costs. Lastly, the company expects $400 million to $700 million in  “facility consolidation activities” and other contract termination costs.

Restructuring initiatives are expected to be “substantially completed” by end of 2024, WBD wrote in the filing. It added that the “strategic analysis of content programming” could result in higher costs than the estimates given.

WBD, which will report third quarter earnings on November 3, estimates it’ll incur $1.3 billion to $1.6 billion of restructuring charges in Q3.

Since WarnerMedia and Discovery officially merged in April, the combined company has sought to alleviate its $53 billion debt load. The disclosures Monday are part of WBD's plan to achieve cost synergies, with the restructuring framework finalized in Q3.

CEO David Zaslav previously emphasized WBD won’t overspend on content to drive subscriber growth. He said the company is relying on HBO Max and Discovery+’s “strong foundational offering” to build its streaming presence.

A combined HBO Max and Discovery+ streaming service is expected to drop sometime next year, and it will feature both ad-free and ad-lite subscription tiers.

As for organization restructuring, media reports earlier this year said WBD plans to slash its global sales team by 30%, whether it’s through buyouts, layoffs or natural attrition. This maneuver is based on WBD’s larger initiative to achieve $3 billion in annual cost savings.

Some analysts have their doubts on whether WBD can effectively manage its debt load. A Bloomberg Intelligence report from August suggested WBD’s current goal of reducing its leverage “could be a stretch,” due to an expected decline in Q3 ad sales worldwide among other factors.

Uncertainty of WBD’s financial status led to speculation that the company could be scooped up by another media corporation, like Comcast. But Zaslav last month rebuffed rumors of any potential merger, telling WBD employees the company is “absolutely, not for sale.”